Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 181234
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Alberta Carbon Levy
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the Alberta carbon levy paid in respect of the supply of natural gas made by […][the Distributor], a natural gas distributor, to its customers.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand
1. [The Distributor] is a natural gas distributor and is a registrant for purposes of the ETA with the GST/HST registration number […].
2. The Alberta Climate Leadership Act (CLA), which imposes a carbon levy on consumers of various carbon-emitting fuels, became effective January 1, 2017.
3. Subsection 1(1) of the CLA includes the following definitions for purposes of the CLA:
“…
(e) “consumer” means a person that produces or purchases fuel in, or imports fuel into, Alberta
(i) for use by that person,
(ii) for use by another person at the first person’s expense, or
(iii) on behalf of, or as agent for, a principal for use by the principal or by another person at the principal’s expense;
…
(h) “direct remitter” means a recipient as set out in section 25(1);
…
(k) “fuel” means a substance set out in the Table in the Schedule;
…
(u) “natural gas distribution system” means a system, not including a transmission pipeline, by which natural gas is distributed to recipients;
(v) “natural gas distributor” means
(i) a person that measures a recipient’s natural gas consumption on a regular basis for the purpose of billing the recipient directly or providing a retail dealer with the recipient’s billing information, or
(ii) a person prescribed as a natural gas distributor but does not include a recipient that sells or removes natural gas that is subject to the carbon levy pursuant to section 8(3) from a transmission pipeline;
(w) “natural gas services” means the issuing of bills to recipients, collection of amounts owing and responding to customer billing inquiries;
…
(gg) “purchase” means to purchase or otherwise obtain fuel with or without giving consideration;
…
(ii) “recipient” means
(i) a person that purchases fuel,
…
(xii) a natural gas distributor,
…
(xix) a person that is required by this Act to pay a carbon levy on fuel used in Alberta…
…
(kk) “registrant” means a person registered under section 27;
…
(mm) “sell” means to sell or otherwise supply fuel with or without receiving consideration;
…
(ss) “vendor” means a person that sells fuel to a consumer;
…”
4. Subsection 3(1) of the CLA states “The purpose of this Act is to provide for a carbon levy on consumers of fuel to be effected through a series of payment and remittance obligations that apply to persons throughout the fuel supply chains.”
5. Section 8 of the CLA states, in part,
“…
(5) Subject to subsections (6) to (9), every recipient shall pay to the Crown a carbon levy on natural gas, at the rate for natural gas set out in the Table (Footnote 1) in the Schedule, at the time the recipient sells, removes or purchases natural gas from a natural gas distribution system.
(6) No carbon levy is payable under subsection (5) if the natural gas is purchased exempt from the levy under section 15.
(7) The amount of the carbon levy payable by a recipient pursuant to subsection (5) must be determined by the natural gas distributor and either
(a) communicated by the natural gas distributor to the retail dealer that provides natural gas services to the recipient at the time other billing information in respect of the recipient is provided to the retail dealer, or
(b) billed by the natural gas distributor to the recipient at the time the recipient is billed for the recipient’s natural gas usage if the natural gas distributor is the entity that provides natural gas services to the recipient.
(8) Subject to the regulations, the retail dealer shall remit to the natural gas distributor at the prescribed time the total amount of carbon levy determined by the natural gas distributor pursuant to subsection (7) and communicated to the retail dealer by the natural gas distributor.
(9) Every natural gas distributor shall remit to the Minister at the prescribed time the total amount of carbon levy determined by the natural gas distributor pursuant to subsection (7) in respect of all recipients.
…
(11) A carbon levy payable pursuant to this section must be determined in accordance with the regulations and must be remitted in accordance with section 25.”
6. Section 25 of the CLA states, in part,
“(1) Subject to the regulations, the following persons are direct remitters
…
(j) a natural gas distributor
…”
(2) Subject to subsection (4), a direct remitter shall remit the carbon levy payable pursuant to sections 4, 6, 7, 8, 9(2)(b) and (4) and 10 to the Minister at the prescribed times and in the prescribed manner.
(3) Subject to the regulations, every recipient other than a direct remitter shall remit the carbon levy payable pursuant to sections 4, 8 and 9(2)(a) to the person that supplied the recipient with the fuel.
(4) When a direct remitter purchases fuel on which the carbon levy is payable pursuant to sections 4, 8 or 9, the direct remitter shall remit the carbon levy to the person that supplied the direct remitter with the fuel.”
7. Section 79 of the CLA states, in part, “The Lieutenant Governor in Council may make regulations
…
(e) respecting the determination of the amount of carbon levy payable or refundable under this Act;
(f) prescribing the times at which carbon levy must be paid;
(g) respecting the remittance of a carbon levy under this Act, including, without limitation, regulations prescribing the times at which, the manner in which and the persons to whom a remittance must be made;
…”
8. Section 6 of the Climate Leadership Regulations (CLR), made pursuant to section 79 of the CLA, states, in part,
“(3) For the purposes of section 8(1), (3) and (5) of the Act, if a recipient is billed by billing period, the amount of fuel sold, removed or purchased by the recipient during a billing period is the amount of fuel for the purposes of determining the carbon levy payable by the recipient for the billing period.
(4) For the purposes of subsection (3), if the amount of fuel sold, removed or purchased is estimated for the purpose of preparing a recipient’s bill for a billing period, the estimated amount is deemed to be the amount of fuel sold, removed or purchased for the purposes of determining the carbon levy payable by the recipient for the billing period.
(5) For the purposes of subsection (3), if, subsequent to a billing period for which the amount of fuel sold, removed or purchased was estimated, the actual amount of fuel sold, removed or purchased becomes available, the natural gas distributor shall redetermine the carbon levy payable based on actual amounts.
(6) For the purposes of subsection (5), a natural gas distributor shall redetermine the carbon levy payable using
(a) the operating practices of the natural gas distributor that are filed with the Alberta Utilities Commission if applicable, or
(b) in any other case, a method acceptable to the [Alberta Finance] Minister.
(7) The amount of carbon levy that a natural gas distributor must remit to the Minister in respect of a reporting period is the billing cycle amount.”
9. You have informed us that [the Distributor] as a natural gas distributor, is required to charge and collect the Alberta carbon levy on the supply of natural gas sold to its customers.
RULING REQUESTED
You would like to know whether the carbon levy charged by [the Distributor] in respect of the supply of natural gas it makes to its customers is subject to the GST.
RULING GIVEN
Based on the facts set out above, the carbon levy charged by [the Distributor] to its customers in respect of the supply of natural gas is included in the consideration for the taxable supply of natural gas and is, therefore, subject to the GST.
EXPLANATION
Section 165 of the ETA imposes GST/HST on taxable supplies made in Canada, calculated at the applicable rate, on the value of the consideration paid or payable for the supply, except where the supply is a zero-rated supply. Subsection 123(1) of the ETA defines “consideration” to include “any amount that is payable for a supply by operation of law.”
Pursuant to paragraph 154(2)(b) of the ETA, for purposes of the GST/HST, the consideration for a supply of a property or a service includes “any provincial levy that is payable by the recipient, or payable or collectible by the supplier, in respect of that supply or in respect of the consumption or use of the property or service, other than a prescribed provincial levy that is payable by the recipient.” A “provincial levy” is defined to mean “a tax, duty or fee imposed under an Act of the legislature of a province in respect of the supply, consumption or use of property or a service.” A prescribed provincial levy is a levy prescribed in the Taxes, Duties and Fees (GST/HST) Regulations.
The Alberta carbon levy is imposed under the CLA, an Act of the Alberta legislature, in respect of the supply, consumption or use of fuel, in this case natural gas. Therefore, the carbon levy is a “provincial levy” as defined in section 154 of the ETA. As the carbon levy is imposed in respect of the supply of natural gas, is payable by [the Distributor]’s customers as recipients (for purposes of the ETA) of the supply of natural gas, is collectible by [the Distributor] as the supplier (for purposes of the ETA) of the supply of natural gas, and is not a prescribed provincial levy for purposes of section 154 of the ETA, the consideration for the supply of natural gas made by [the Distributor] will include the carbon levy. As the supply of natural gas made by a gas distributor in Alberta to its customers in Alberta is a taxable supply, the consideration payable for this supply (which includes the carbon levy) is subject to the GST.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7938. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Brent Fleming
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 The Table in the Schedule provides that the carbon levy rate for natural gas is $1.011 /GJ for 2017 and $1.517 /GJ for 2018 and subsequent years.
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